The government has hinted smokers will be a target in its attempt to find budget savings.

Cigarettes and Big Tobacco the new battleground in the lead-up to the election. Picture: AFPSource: AFP

LABOR is launching a surprise attack on the Liberals for accepting donations from the tobacco industry as the Government prepares to increase cigarette taxes.

Smoking has suddenly become the new political battleground and the centre of the economic and health debate.

An ALP video advertisement released last night features recordings of Opposition Leader Tony Abbott defending the donations from a legal industry. Cigarette makers have given the Liberals some $3 million over 12 years.

"I don't see why, if they want to make a donation, we don't accept it," Mr Abbott is shown saying.

Labor has refused money from the industry since 2004.

The advertisement also highlights a figure used yesterday by Prime Minister Kevin Rudd that smoking costs the economy $31.5 billion a year, and that it is related to thousands of cancer deaths.

The Opposition is today ready to press home its own accusation Mr Rudd has benefited from Big Tobacco.

Mr Abbott is expected to again highlight that as a back bencher last October Mr Rudd accepted plane travel paid for by a foundation with tobacco links.

Mr Rudd had declared on his MP's register of interests the air trip to Berlin for a foreign affairs comment. It was provided by the Kober Foundation which owns a major supplier of cigarette making machines and had a turnover of $1.1 billion in 2011.

Treasurer Chris Bowen will release an economic statement before the end of the week to detail how the Government will make up for a revenue decline which has been much steeper than forecast in the Budget last May.

The Government has been looking at spending cuts and tax rises which would not cost jobs, reduce productivity or affect essential services head of the official start of the election campaign.

It has decided on a rise in cigarette excise and Prime Minister Rudd and Health Minister Tanya Plibersek have been talking up the health benefits and economic advantages of reducing smoking rates.

The Opposition has been declining to say it would support or oppose more tax on tobacco and has limited comment to the Government's need to find more cash.

"This is a government which can't control its own spending; therefore, it's always looking to hit the Australian people with new taxes," said Tony Abbott yesterday.

The last Budget Mr Rudd presided over as Prime Minister, in 2010, increased excise on tobacco by 25 per cent. Since Labor took office in 2007 taxes on tobacco have risen 43 per cent, which includes regular twice-yearly excise increases by the inflation rate.

Taxes now make up some 60 per dent of the retail price of a packet of 30 Peter Jackson cigarettes.

Mr Bowen this morning said all factors had been taken into account when considering the increase in taxes on tobacco, including health and revenue considerations.

"We certainly take into account all the impacts of the decisions we make," Mr Bowen told ABC Radio.

"We look at things like the fact that last time the tobacco excise was increased there was a reduced consumption by about 11 per cent. We look at the views of health experts that say this will be a substantial step in reducing smoking, and particularly in the number of young people taking up smoking.

"So it is a holistic measure. We look at the impact on government revenue and we also look at the health impact."

Mr Bowen did not rule out further tax increases in other areas when the government's economic update was likely released tomorrow.

"We have said there is an economic statement coming and I have said there are some difficult decisions to be made to return to surplus," he said.

The Treasurer is attending an event this morning with Home Affairs Minister Jason Clare and Youth Off The Streets founder Father Chris Riley in western Sydney. He will doorstop on the tobacco tax increase at around 10am.

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